Ten years ago, the City of Lawrence set up a Tax Increment Financing (TIF) District and a Transportation Development District to fund the building of what is now the landmark Oread Hotel high atop the KU campus.
The “public-private partnership” between the city and the developer went bad. How bad? On Wednesday, the Feds indicted developer Thomas Fritzel, 52, and bookkeeper Keela Lam, 46, on federal charges of scamming more than $400,000 in fraudulent tax refunds from the City of Lawrence.
Kudos to the Lawrence Journal-World (LJW) for keeping an eye on the public-private partnerships that appear to have done more good for Fritzel than for either for the City of Lawrence or for KU.
A month before breaking the Oread story, the Journal-World did an in-depth exposé on another Fritzel deal, this one even more eye-popping. In 2013, the recently fired KU athletic director, Sheahon Zenger, voided a lease between the KU Athletics Department and Fritzel’s Bliss Sports, a for-profit company that developed the university’s Rock Chalk Park.
Under the redrafted lease, KU sacrificed its ability to end the partnership after 30 years and yielded complete control over whether to extend the lease to Bliss Sports. KU also agreed to reimburse Bliss Sports up to $4.5 million for the rent it payed to a Kansas University Endowment Association entity that actually owned the property.
When the LJW asked Kansas Athletics officials why they surrendered control, CFO Pat Kaufman acknowledged the lease was changed at Fritzel’s request. His company “had become concerned that its interests weren’t adequately protected by the original lease.”
Concludes the LJW, “When the Rock Chalk Park idea became public in 2013, it was touted that KU would pay $39 million for the facilities as part of the unique public-private partnership. Today, KU Athletics has committed to $66 million in lease payments over a 30-year period. If the landlord chooses to extend the lease for another 20 years, the total cost could grow to more than $100 million.”
In the case of Rock Chalk Park, there is no allegation of criminality. If the Feds are right, the Oread Hotel deal crossed the line. There is a lot of money at play in Lawrence, city money and state money, and someone needs to pay more attention.